Asia markets recap: China GDP in focus

April 15, 2014, 8:42 PM ET

Welcome to the Asia Markets live blog, a running account of what the region’s stock markets are doing, along with other news. Today, China\’s economy shows slow, but better-than-expected growth for the first quarter, with markets giving a mildly positive reaction to the data.

In Australia, the S&P/ASX 200 is up 0.3%, while the Australian dollar retreats to 93.36 U.S. cents from 93.56 U.S. cents on Monday.

Financial stocks continue to rebound, as top investment bank Macquarie Group moves higher by 0.7%, Westpac Banking Corp. is up 0.6%, and both National Australia Bank and Australia and New Zealand Banking Group edge up 0.3%.

However, mining shares retreat amid worries about slower growth for China, which is Australia’s major trading partner.

Other than the current 1.8% gain for Japan’s Nikkei Average, the major Asia indexes are showing relatively constrained moves, perhaps a sign of caution ahead of key Chinese numbers slated for release Wednesday.

With that in mind, here’s a rundown of market expectations for the data, according to a Dow Jones Newswires survey of economists:

Gross domestic productQ1 seen +7.3% (Q4 2013 was +7.7%)

Industrial output March seen +9% (Jan-Feb was +8.6%, reported as a single result)

Retail sales March seen +12.2% (Jan-Feb was +11.8%, reported as a single result)

China’s gross domestic product grew 7.4% in the first quarter, down from 7.7% in the previous quarter, China’s National Bureau of Statistics said Wednesday. However, the gain was higher than the 7.3% increase forecast by economists from two seperate polls by The Wall Street Journal and Reuters.

The economy rose 1.4% from the previous quarter, the statistical bureau said.

Among other data, China’s industrial output gained 8.8% in March versus a year earlier, up from 8.6% in the January-to-February period. Retail sales growth also accelerated to 12.2% in March, compared to 11.8% for the January-to-February period.

Hong Kong’s benchmark Hang Seng Index is rising 0.5%, up from the opening gain of 0.1%. However, the Shanghai Composite is edging down 0.2%.

The Australian dollar, which is often sensitive to economic news from China — Australia’s top trading partner, strengthened after the data and reversed earlier losses. The currency is trading at 93.57 U.S. cents, slightly higher than 93.56 U.S. cents from the prior session.

The lackluster, but better-than-expected growth seems to have temporarily eased investors concerns for a hard-landing of China’s economy.

Some buyers are returning to the markets after China released first-quarter economic data, lifting Hong Kong’s Hang Seng Index by 0.7%. Over on the mainland, the Shanghai Composite Index also bounce back after a 1.4% loss in the prior session, now trading up 0.3%.

China’s GDP growth slowed less-than-expected in the first quarter of this year, data showed today (see earlier posts in the blog). But analysts said there is a risk that China might miss its 7.5% growth target for 2014, and policy makers are likely to implement stimulus measures in the coming weeks.

While the “implied” January-February growth is weak, the Chinese economy showed “a meaningful rebound” in March, said analysts from Goldman Sachs, adding that the rebound may be due to policy moves from Beijing over the past few weeks

The Chinese government announced in March that it would implement “forceful” measures to aid the economy, and introduced earlier this month several small-scale stimulus measures, including reducing tax burdens for small and medium-sized enterprises, building more affordable housing, speeding up railway constructions in central and western China.

“The announcements revealed the policy intentions of the government, which has probably begun to take administrative measures to accelerate the pace of exiting projects already under construction,” said Goldman’s analysts in a note on Wednesday.

However, the economic improvement in March may not be big enough, analysts from Bank of America Merrill Lynch (B. of A. Merrill Lynch) warned in another note, noting that there is a risk that China will not “deliver an around 7.5% growth target for the whole year.”

“Today’s data will not change the current pro-growth policy stance,” said the analysts from B. of A. Merrill Lynch.

In particular, given the continued weakness in the property sector (as reflected in falling housing sales), the Chinese government might slightly ease restrictive measures “in some lower-tier cities” and quicken social housing to increase residential investment.

Looking ahead, analysts expect China’s economy to rebound in the next few months, with the supportive policies kicking in.

According to B. of A. Merrill Lynch’s forecast, China’s GDP growth may accelerate to 7.5% year-on-year in the second quarter of this year, with the estimated sequential growth up to around 1.8%.

Meanwhile, Royal Bank of Scotland (RBS) analysts also believe a possible mild easing of the policy stance would help hold up the Chinese economy.

“Despite the weak start to the year but encouraged by the mild pick-up in March, we remain relatively constructive on China’s economic growth outlook for this year,” RBS economists Louis Kuijs and Tiffany Qiu said.

They maintained their GDP growth forecast of 7.7% for 2014, while noting that “growth-policy dynamics in the coming months may keep markets nervous.”

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